Auctions add to commercial property lustre

As the global economy continues to grapple with sluggish growth and challenging conditions, the commercial property sector has emerged as a strong performer, especially in South Africa. In fact, South African listed property offered the highest return of any asset class in 2011.

Key factors in the strong performance of the sector include strong demand for prime commercial and retail space, a move to a more diversified portfolio by property funds, and strong, experienced fund management teams that have made moves to manage risk proactively during tough economic times. One way that these funds and commercial property investors have successfully achieved this is by embracing auctions as an effective mechanism for the rapid and efficient disposal of smaller non-core assets, especially those that are vacant and non-incomeproducing.

“Auctions became an increasingly popular sales channel as commercial property investors and fund managers sought innovative ways to realise a return on their investment through the most recent economic downturn,” explains Mark Kleynhans, director of Aucor Property. “However, the auction value proposition has become entrenched in the market and continues to play an important role in the commercial property sector.”

According to Kleynhans, the auction platform provides commercial property sellers with the opportunity to quickly dispose of assets, which makes them more dynamic and able to respond to rapidly changing market conditions. “This shorter sales cycle is created by the auctioneers, as interest in a property is drummed up in advance and the right mix of potential buyers for a property are assembled into one room. This also helps to create the demand required to realise a good sales price on auction day.”

These shorter sales cycles also help to eliminate the high carrying costs associated with sitting on a commercial property for long periods of time when trying to sell through private treaty. “Auctions eliminate the long negotiation periods commonly associated with private sales with a single buyer, and this process provides a better opportunity to realise the true market value of the property,” continues Kleynhans.

“As such, auctions are no longer just for distressed sellers and bank repossessions. By creating the right demand for a property in advance, by securing the right group of potential buyers and investors, an auction is the ideal sales platform to realise the greatest value from a commercial property sale. This ensures that the seller realises the return they are after, while buyers get a quality property at the right price. And with the recent 50 basis points reduction in the prime lending rate announced by the South African Reserve Bank, expect to see a further increase in the popularity and effectiveness of commercial property auctions,” he concludes.

Aucor Property will be holding its next Cape Town auction event on September 11 at the One & Only Hotel. The next Johannesburg auction event will be held on September 20 at the Park Hyatt Hotel in Rosebank. For information on these events and properties to come under the hammer on the day, visit www.aucor.com or contact one of the Aucor Property Brokers on0861 2828 46.

Mark Kleynhans, director, Aucor Property

By creating the right demand for a property in advance, by securing the right group of potential buyers and investors, an auction is the ideal sales platform to realise the greatest value from a commercial property sale